Final answer:
Due to a drought that decreases the supply of agricultural products like wheat, it is reasonable to expect the price of bread to increase, causing an increased demand for alternative products like potatoes. Consequently, the prices of both bread and potatoes are likely to rise while the demand for bread may decrease.
Step-by-step explanation:
When considering the impacts of sustained summer droughts on the domestic supply of wheat, several economic implications arise.
First and foremost, as the supply of wheat declines due to drought conditions as exemplified by the 2014 severe drought in the Manchurian Plain, China, this scarcity leads to an increase in the price of bread, since wheat is a primary ingredient for bread production.
Meanwhile, potatoes stand as a substitute for bread. Therefore, it is reasonable to expect that as bread becomes more expensive, consumers will seek alternatives, leading to an increase in the demand for potatoes.
Consequently, as demand for potatoes rises, their price is likely to increase as well. In the context of bread, the higher prices may lead to a decrease in the quantity demanded, effectively reducing the demand for bread as customers seek less costly options.
These basic economic principles reflect the interconnectedness of supply, demand, and the prices of related goods. It is clear that climate and weather conditions have significant roles in shaping agricultural supply, which then ripples through the market affecting both the supply and demand for various commodities.